Tax rebates for Champaign hotel get unanimous approval

Officials agree that $3 million incentive worth it to fill in hole left by Metropolitan Building fire in 2008

CHAMPAIGN — City council members unanimously said Tuesday night that they would be willing to offer up to $3 million in tax rebates to the developer of a proposed nine-story hotel to see the project get off the ground.

Craig Rost, deputy city manager for economic development, said he and other officials are tired of hearing people ask when they will find something to fill the "hole" left when the Metropolitan Building burned down at the corner of Church, Neil and Main streets in 2008. Now they have an answer.

Planning Director Bruce Knight said it's important that the city complete a few "tipping point" projects that will carry the city's downtown area forward when a special taxing district meant to encourage development expires in 2017.

Knight said installing a hotel in the city's center is near the top of that list of priorities.

Successful downtowns "have employment, they have entertainment in bars and restaurants, they have residents so it's a 24-hour downtown," Kinght said. "And almost inevitably, they have a hotel."

Hans Grotelueschen of YG Financial Group has asked for the tax incentive from the city to build the $28 million hotel, which includes plans for 145 rooms and 145 new parking spaces. For seven years, the city would reimburse the developer for the food and beverage tax, property tax and hotel-motel tax dollars it pays to the city.

Officials only have approximate numbers of how much that might be over the course of the seven-year agreement, but they have capped the tax rebates at $3 million.

"It's returned after the success of the project instead of financial investment in the project," Rost said.

After the rebates expire, officials expect the property to generate $300,000 annually in new revenue for the city tax roll.

Negative comments on the project were few on Tuesday night. The owner of the Metropolitan Building, who had been renovating the 19th-century building when it burned down, cheered the proposal.

"From our perspective, I couldn't be more excited about this project, and it couldn't be in better hands with Hans," Jeff Mellander said.

Champaign resident Bill Glithero was not as enthusiastic. He said it does not seem right that the city is offering a tax rebate to a developer when it recently approved a 4-cent-per-gallon gas tax and anticipates a coming storm-water fee.

"Anytime I hear someone say it's a win-win situation, I just have to start running in the other direction," Glithero said.

But council member Tom Bruno said tax incentives for new developments "are often misunderstood by the public." He said the city is not cutting a new check.

"We simply turn back around taxes that we would not get if they never break ground," Bruno said.

Knight said the side effect of having a hotel in downtown Champaign will be significant for the bars and the restaurants in the area. That will mean new tax revenue for the city, too.

"We always talk about the value of adding residents to downtown," Knight said. "This is 150 residents that don't have a place to cook. They're going to eat out every night."